Faculty of Business Administration Seminar Announcement
Date: October 09, 2015 Friday
Place:Faculty of Business Administration, MA-202
“Fear, Anger and Credit. On Bank Robberies and Loan Conditions”
By Steven Ongena
University of Zurich
ABSTRACT: We study the impact of emotions on real-world decisions made by loan officers by analyzing the loan conditions of loans granted immediately after a bank branch robbery. We find significant differences in conditions of the loans granted after a robbery (compared to changes in loan conditions that occur contemporaneously at unaffected branches) suggesting that loan officers do change their decisions following this event. In general loan officers seem to adopt so-called avoidance behavior: they decrease at once the likelihood of having contact with the client by lengthening the maturity of the loan contract and by demanding more collateral thereby reducing the probability of loan non-performance (and dealings with the client) prior to maturity. Loan officers also end up granting loans with somewhat softer loan conditions. Further in accordance with the literature on posttraumatic stress we find that the avoidance behavior that manifests itself in loan conditions is halved within two weeks after the robbery and that the effect further varies depending on the presence of a firearm during the robbery.